Lessons Learned from the Global Sourcing Decision What are the key sourcing decisions to be considered by a complex global corporation? Guy Cowan will discuss the critical factors to constantly evaluate when considering global sourcing combinations. Complex global corporate structures can leverage cost-effective locations in order to provide high performance internal back office services such as finance and accounting, human resources, and information technology.

1. Lessons Learned
From the Global Sourcing Decision
Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group
Thursday, October 14th 2004
Confidential and Proprietary

2. Lessons Learned from the Global Sourcing Decision
• Know What You’ve Got – Size of the prize/business case
• Find a Champion – Break down silos
• Who’s Coming Along? – Finance / IT/ HR / ?
• What’s in Scope? – How do you know when you’re ready?
• Systems Standardization? – Moving work with multiple systems
• Where to Move to? – What drives that decision
• In-House or Outsourced? – What factors to consider
• Risk Evaluation – Before, during and after migration
• Governance – Where does the buck stop?
• Managing the People Issue – In the business and in the service centers
• Managing External Consultants
• Sourcing Considerations – Development of the business case
• Sourcing Considerations - Trends
• Sourcing Considerations - Staffing
• Summary of Key Learnings - Lessons Learned
Confidential and Proprietary 2 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

3. Know What You’ve Got - Size of the prize/business case
• Find out how many employees work on given
activities and location – 80/20 Rule
• Assume hidden bodies - e.g., finance activities not
controlled by Finance
• Highest cost is redundancy
• European work councils require significant
preparation/consultation and time
• Base case should assume no process improvements
• Factor in wage inflation
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Ben Trowbridge, Trowbridge Group

4. Find a Champion – Break down silos
• Businesses do not typically want to give up ownership
• Requires senior involvement to create enterprise-first
mentality
• Cost allocation should encourage and reward early
movers
• Start with simple, proven, stable processes – quick wins
to gain confidence
• Ensure each stakeholder has a say but not overall
control
Confidential and Proprietary 4 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

5. Who’s Coming Along – Finance / IT / HR / ?
• Typically the skill sets/communication requirements
are different for IT. Separate location decisions are
possible
• HR transaction processes are more compatible with
Finance and subject to same process improvement
opportunities
• Once stabilized, more complex activities can follow
(planning, budgeting, internal consultancy)
Confidential and Proprietary 5 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

6. What’s in Scope? – How do you know when you are ready?
• Routine transaction processing (AP, AR, stock
accounting, etc.) – no brainers
• Finance and accounting – G/L reconciliations, bank
reconciliations, inter-company charges – okay, but some
resistance
• In some businesses there is more reluctance, e.g., Oil
and Gas Venture accounting, client intimate transactions
• As confidence is created, sophisticated processes can be
outsourced, e.g., manufacturing variance processes,
planning and logistics support
• Decision to outsource linked to:
Stable and documented processes
Good controls
Detailed risk identification
Confidential and Proprietary 6 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

7. Systems Standardization – Moving work with multiple systems
• Can you migrate multiple businesses on multiple
systems, or should you wait until you have one
standard system?
• Process Improvements before moving. When is
enough?
• What are the key considerations in deciding if you
have sufficient systems stability to migrate safely?
• Can the release of new systems be implemented in
remote locations?
• Is there a right answer?
Confidential and Proprietary 7 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

8. Where to Move? – What drives the decision?
• Internal factors
Same Time Zone or follow the sun
Speed of response
Customer Intimacy
Night shift working
Language
“Pitcher” country political issues
• Local factors
Size and quality of labor force
Political stability
Security/Comms
Cost/Incentives
Confidential and Proprietary 8 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

9. Where to Move to?
Low Medium High Philip-
India Israel pines Ireland Canada China Russia
Government Support
Labor Pool
Infrastructure
Educational System
Cost
Process Quality
Cultural Compatibility (US)
Overall Climate
Company Presence
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Ben Trowbridge, Trowbridge Group

10. In-House or Outsource?
Outsource Captive SSC
• Loss of control?
• Cost vs. Speed of set up
• Loss of knowledge?
• Ease of start up
• Presence in country
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Ben Trowbridge, Trowbridge Group

11. Risk Evaluation Before Mitigation
Process
1 Operations / Financial Staff
15 23 18 20
High
2 Purchases – Bulk
3 Purchases – Truck
5 13 26 4 Sales
Fit for Off-Shoring
5 Exchange – Internal Balancing of Exchanges
6 Exchange – Comparison of Partner Information
6 7 8 7 Exchange – Communication with Partners
Medium
8 Exchange – Communication with Internal Personnel
25 11 12 16 9 Movement :- Booking
10 Movement : – Reviewing Interface Errors
2 4 17 19 21 11 Movement : – Reviewing SAP Errors
12 Movement : – Answering Analyst Inquiries
22 24 13 Movement : – Monthly Activities
14 Movement : Marine
14 15 Reconcile – Compare Src System w/ Shipper Rpt
10 12
Low
16 Reconcile – Reviewing Interface Errors
17 Reconcile – Reviewing SAP Errors
1 9 3 18 Reconcile – Inventory Validation
19 Reconcile – Answering Customer Inquiries
20 Reconcile – Month End Activities
High Medium Low
21 Reconcile Terminals – Reviewing Interface Errors
22 Reconcile Terminals – Reviewing SAP Errors
Risk 23 Reconcile Terminals – Inventory Validation
24 Reconcile Equity – Customer Inquiries
Medium-term Short-term Immediate 25 Reconcile Equity – Terminaling Prtnr Recon
implementation implementation implementation 26 Reconcile Equity – Month End Activities
Total
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Ben Trowbridge, Trowbridge Group

12. Risk Evaluation During Migration
HIGH
Current Perceived Risk Levels as of xxx
Business
SSC Operations
Employees/ IT
Training Interruption Facilities
Competencies Systems
Service
Fin & Ops Level Security Migration/
IT
IMPACT
Controls InfrastructureAgreements SSC
MEDIUM
Legal Experience
Early Delays/ Change
Entity/ Clear
Tax Migration Approvals Management Interfaces
Failure
EVP (Salary Customer/
Administrative Employee
SSC & Benefits) Partner/
Supplier Systems Morale
Employee Resistance
Turnover
Logistical/
Travel
LOW
ACCEPTED NEEDS UNACCEPTABLE
IMPROVEMENT
LOW MEDIUM HIGH
LIKELIHOOD
Active Risk Management Process in Place
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Ben Trowbridge, Trowbridge Group

13. Governance – Where does the buck stop?
Governance Process Regular performance reviews
Value Business Ongoing
Implementation
proposition case operations
Qualification Commitment Go-live Post implementation
review review review review
Big Rules
• Basic ERP’s • Clear ownership
• Systems architecture
• Mandate for driving process improvements
• Major businesses
share resources • Controls responsibility – with business
• Build on business
initiatives
• Escalation process
• In-Sourcing • SLA’s
• Co-ordination with
IT/HR
• Change management control
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Ben Trowbridge, Trowbridge Group

14. Managing People Issues
• Clear and honest communications
• Make sure each individual knows where he/she
stands immediately after general announcement
• Sensitivity in handling work councils
• Employee value proposition
Business Finance
Shared Services Finance
• “Branding” of Shared Services Center – same
culture or unique
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Ben Trowbridge, Trowbridge Group

15. Managing External Consultants
• Location / Evaluation
• Validation of business case
• Short term help for start up and transition
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Ben Trowbridge, Trowbridge Group

16. Sourcing Consideration – Development of a business case
Business Plan for new SSC
How do we develop a plan that will have: • Pricing Factors
• The lowest risk
The lowest risk • Support Staff
• The greatest speed of execution
The greatest speed • Staff Costs
• Net lower total cost
Net lower total cost • Program Office
• Timing
• Overhead Costs
Location and Configuration • Premiums
Deal and Relationship Structure
• Building
Building
PLAN
PLAN
• Tax
Scope
• Migration
• IT/Telecom
• Depreciation
Confidential and Proprietary 16 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

17. Sourcing Considerations - Trends
Global Birth Rates:
Global Birth Rates: China: Potential Player - By 2010 this Labor pool giant
China: Potential Player - By 2010 this Labor pool giant
China 1.69 has the potential to overtake India as the dominant BPO
China 1.69 has the potential to overtake India as the dominant BPO
leader. English skills are being developed in government
India
India 2.85
2.85 leader. English skills are being developed in government
supported programs to support growth in global market.
Philippines 3.22 supported programs to support growth in global market.
Philippines 3.22 Size: 10,000 FTEs (offshore); 30,000 FTEs (domestic)
Size: 10,000 FTEs (offshore); 30,000 FTEs (domestic)
Current focus: Data entry, engineering, contact centers
Current focus: Data entry, engineering, contact centers
for Japanese and Korean markets.
for Japanese and Korean markets.
The Hidden Eastern Europe: Regional Player -
Eastern Europe: Regional Player -
Non-English European language
Multiplier Non-English European language
requirements.
requirements.
Size: 22,000 FTEs
Size: 22,000 FTEs
India: No. 1 Player - The dominant leader in
India: No. 1 Player - The dominant leader in
BPO and IT Outsourcing
BPO and IT Outsourcing
Size: 208,000 FTEs supporting a variety of
Size: 208,000 FTEs supporting a variety of
processes. Providers claim over 100,000 of
processes. Providers claim over 100,000 of
additional seat capacity.
additional seat capacity.
Latin American: Regional Player -
Latin American: Regional Player -
Spanish Language support with marginal Malaysia: Niche Player in Contact Center,
Spanish Language support with marginal Malaysia: Niche Player in Contact Center,
cost difference between countries. Human Resources and Administration
cost difference between countries. Human Resources and Administration
support.
support. Philippines: No. 2 Player -
Philippines: No. 2 Player -
Size: 48,000 FTEs
Size: 48,000 FTEs
Scope: Primarily contact
Scope: Primarily contact
centers, shared services, and
centers, shared services, and
specialized niches. Surging
specialized niches. Surging
demand due to excellent US
demand due to excellent US
accented English language
accented English language
support.
support.
Confidential and Proprietary 17 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

18. Sourcing Considerations - Staffing
Labor Pool
• Differentials in direct labor costs and 2200
USA
overheads are the main drivers of total
employment cost savings Ireland 40
Non-U.S. citizens
• Careful build out of the new center and Mexico 100
transition planning can control start up 18
Malaysia
and long term costs English-speaking graduate and
post-graduate per year
90
• Local labor inflation will not reduce the China
offshore advantage for the foreseeable Philippines 320
future India 2,100
Total Employment Cost 0 500 1,000 1,500 2,000 2,500
US
$60,000 Salary and Fringe
60,000
Overhead
Facilities
50,000 IT and Telecom • The English speaking Indian and
Costs Represent Philippino graduate pools and high
40,000 $38,400 High End Finance
and Accounting and HR
unemployment rats are projected to
functions provide an attractive environment for
30,000
EUROPE
$23,000
offshore operations
20,000 ASIA • Non-English speaking requirements
$16,000 $14,720 can be supported from a variety of
10,000 $21,600
$7,680
locations
$8,320 $8,280
-
US ASIA EUROPE
Source: Trowbridge Group
Confidential and Proprietary 18 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

19. Summary of Key Learning's - Lessons learned
• It’s a Marathon - Not a Sprint
• The Organization has to be primed/pushed - The Champion
• Governance is a shield to block progress
• Walk before you run - but don’t be afraid to walk
• Risk Monitoring and Mitigation as part of the process - but accept there are risks
lue
y/Va
u ctivit
g Prod High End Knowledge Work
in
imiz
Max Ongoing Productivity Business Enablement
Process
Improvement/
Financial Accounting Technology
Basic Transaction Skills Upgrade
Processes
Cost Arbitrage
“We Came for Cost…We stayed for Quality/Intellectual Capital”
Confidential and Proprietary 19 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group

20. Questions and Discussion
?
Ben Trowbridge
Email: bt@trowbridgegroup.net
Trowbridge Group LP
Two Galleria Center, 13455 Noel Rd, Suite 1000, Dallas, TX 75240
Tel: (214) 696-6410 www.TrowbridgeGroup.net
Confidential and Proprietary 20 Guy Cowan, CFO Shell US
Ben Trowbridge, Trowbridge Group